Aviation

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The aviation sector plays a vital role in the Australian economy.

White Paper

The Aviation White Paper describes the government’s vision for Australia’s aviation sector towards 2050. It will outline measures to keep the sector safe, competitive, productive and sustainable.

Taskforce role

Treasury’s Competition Taskforce worked closely with Department of Infrastructure, Transport, Regional Development, Communications and the Arts (DITRDCA). To develop the Aviation White Paper, the Taskforce and DITRDCA:

  • considered competition issues in Australia’s aviation sector
  • met with stakeholders to understand the sector’s perspectives on competition.

Taskforce working paper

We analysed new comprehensive microdata to explore:

  • how aviation competition evolved in Australia.
  • how competition impacts domestic airfares, including:
    • airfare growth
    • price discrimination.

The working paper was published in conjunction with the Aviation White Paper. It found that:

  • Competition can provide cost‑of‑living relief by lowering prices and price growth.
  • Increased competition saved consumers up to $35.2 billion over the last 14 years through lower airfares. This equals $60 per return trip or $240 for a family of 4.
  • Adding one more airline on a route can lower airfares by 5 to 10 per cent. Adding more airlines leads to further reductions. There is also evidence that the mere threat of competition on a route can lower airfares in some cases.
  • Increased competition reduces price growth. Routes serviced by more than 2 carriers have lower growth rates than those with one or 2 carriers.

This research supports a general point – more competition reduces prices in many sectors. This gives significant cost‑of‑living benefits to Australian consumers.

This study highlights that measuring competition is complex. No one measure is enough to form a complete picture. For the aviation sector, this means we must track several measures:

  • the share of low‑cost carrier seats
  • the number of airlines on a route
  • the number of routes flown by different airlines.

Supporting research

We requested economic modelling from the Productivity Commission and Australian National University (ANU). They modelled different ways to make the industry more competitive and productive. They found this would materially benefit consumers and other sectors of the economy.

Resources